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Home >> Manage Your Money
Managing Cash in a Banking Environment
How do banks optimize cash management with all the daily transactions they carry out? I'm aware that there has to be some sort of software that handles this, but can you please elaborate on how it can optimize cash management while staying above the minimum reserve?
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 Some of a bank's cash management is dictated by security, and those aspects cannot be discussed here. In general terms, each bank branch keeps track of its cash level history, and knows when local payrolls require added cash, and when business cash deposits will mean extra cash needs to be shipped out. Many banks have some branches that are net users of cash, who pay out more than they take in, and others that are net cash sources, where businesses deposit more cash than the branch pays out. In many parts of the country, cash levels are affected by seasonal business cycles, particularly in vacation destinations.
Think of cash as an inventory item in a retail environment. The branch manager knows when shipments can be expected and knows the ebbs and flows of the inventory. He has to forecast days or weeks ahead and plan for cash shipments in or out. In the final analysis, software can assist in a bank's forecast of cash levels, but experience is probably a bigger factor, particularly in smaller community banks.
Published on BankingQuestions.com 2/06/09
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